Walgreens Boots Alliance Inc. (NASDAQ:WBA)

Inventory Turnover

The inventory turnover ratio shows a consistent upward trend from 9.02 in 2014 to 11.44 in 2019, indicating an improving efficiency in inventory management and faster movement of inventory over the years.

Receivables Turnover

The receivables turnover ratio fluctuates throughout the periods, dropping significantly from 23.74 in 2014 to 15.1 in 2015, then varying between 15.1 and 20.01 in the subsequent years, ending at 18.94 in 2019. This fluctuation suggests varying effectiveness in collecting receivables, with a general improvement after 2015.

Payables Turnover

Payables turnover declined sharply from 12.71 in 2014 to 7.59 in 2015, then stabilized around 7.4 to 7.95 through 2019. This indicates the company took longer to settle its payables from 2015 onwards but maintained a consistent payment pace during this period.

Working Capital Turnover

The working capital turnover ratio shows irregular data, with a spike to 98.02 in 2017 from 13.23 in 2016, and values missing for subsequent years. The spike in 2017 suggests an extraordinary efficiency or anomalous event regarding working capital usage during that year, though the absence of later data limits further analysis.

Average Inventory Processing Period

This metric steadily decreased from 40 days in 2014 to 32 days in 2019, reflecting faster inventory processing and turnover, which aligns with the increasing inventory turnover ratio.

Average Receivable Collection Period

The average collection period increased from 15 days in 2014 to 24 days in 2015, then decreased to a range between 18 and 20 days in subsequent years, finishing at 19 days in 2019. After the initial setback in 2015, collection efficiency improved and stabilized.

Operating Cycle

The operating cycle started at 55 days in 2014, increased to 65 days in 2015, then steadily decreased to 51 days by 2019. This reflects a reduction in the time taken for inventory conversion and collection combined, particularly after 2015.

Average Payables Payment Period

The payables payment period rose from 29 days in 2014 to nearly 50 days from 2015 onwards, showing the company extended the time it took to pay its suppliers and then maintained this longer payment cycle consistently.

Cash Conversion Cycle

The cash conversion cycle markedly improved, falling from 26 days in 2014 to just 2 days in 2019. This suggests a significant enhancement in overall working capital management, reducing the time between cash outflows and inflows effectively.

Cost of Sales

The cost of sales exhibited a consistent upward trend over the six-year period. Starting at 54,823 million US dollars in 2014, it increased significantly each year, reaching 106,790 million US dollars by 2019. This more than doubling suggests expanding operations or rising costs associated with goods sold.

Inventories

Inventories showed moderate growth from 6,076 million US dollars in 2014 to a peak of 9,565 million US dollars in 2018. In 2019, there was a slight decrease to 9,333 million US dollars. The general increase followed by a minor decline could indicate improved inventory management or changes in purchasing strategies.

Inventory Turnover Ratio

The inventory turnover ratio displayed a positive trend overall, starting from 9.02 in 2014 and rising steadily to 11.44 in 2019. This upward trajectory implies enhanced efficiency in managing inventory relative to sales. Notably, there were some fluctuations early in the period, with a decrease from 9.02 to 8.82 in 2015, but the ratio recovered and improved consistently thereafter.

Sales

Sales demonstrated a consistent upward trajectory from 2014 to 2019, increasing from 76,392 million US dollars in 2014 to 136,866 million US dollars in 2019. The growth was particularly significant between 2014 and 2015, with an increase of over 35%, followed by more moderate yet steady growth rates in subsequent years.

Accounts Receivable, Net

The net accounts receivable showed a general increasing trend over the period, rising from 3,218 million US dollars in 2014 to 7,226 million US dollars in 2019. However, there was a notable spike in 2015 where the value more than doubled compared to the previous year. Subsequently, the figures stabilized with moderate growth in the following years.

Receivables Turnover Ratio

The receivables turnover ratio experienced considerable fluctuations during the period under review. It declined sharply from 23.74 in 2014 to 15.1 in 2015, indicating a slower collection period for receivables that year. After 2015, the ratio recovered partially, increasing to 18.75 in 2016 and fluctuating slightly in the range of 18.11 to 20.01 in subsequent years, but it did not return to the initial high level observed in 2014.

Overall Analysis

The data indicate strong sales growth accompanied by increased accounts receivable, suggesting an expansion in business volume. However, the decreased receivables turnover in 2015 points to a decline in the efficiency of receivables collection during that year, which partially improved afterward but remained below the 2014 level. This pattern may reflect changes in credit policies or customer payment behaviors impacting the company's liquidity management.

The financial data reveals notable trends in cost management and liquidity over the analyzed years. The cost of sales exhibits a consistent upward trajectory, indicating increasing expenditures related to goods sold. Concurrently, trade accounts payable have also risen substantially, reflecting a growing obligation to suppliers.

Cost of Sales

There is a significant increase in cost of sales from US$54,823 million in 2014 to US$106,790 million in 2019, nearly doubling over the six-year period. The steady growth suggests either expanding business operations, increased input costs, or a combination of both.

Trade Accounts Payable

Trade accounts payable grow markedly from US$4,315 million in 2014 to US$14,341 million in 2019. This rise indicates that the company is extending more credit from suppliers or purchasing on account more frequently, which is consistent with the growth in cost of sales.

Payables Turnover Ratio

The payables turnover ratio declines sharply from 12.71 in 2014 to a range between 7.13 and 7.95 during the subsequent years, stabilizing around 7.4 to 7.5 in the last two years. The initial sharp decrease in turnover suggests the company is taking longer to pay its suppliers. From 2015 onwards, the ratio stabilizes, implying a more consistent payment cycle.

Overall, the data points to expanding business activity given the doubling of cost of sales, aligned with a larger volume of payables. The extended payment period may improve short-term liquidity but could pose supplier relationship risks if prolonged excessively. The stabilization of payables turnover after 2015 indicates management may have established a steady payment rhythm following initial changes.

Working Capital

The working capital demonstrates a volatile trend over the observed periods. Initially, it shows a moderate amount of 3,347 million USD in 2014, followed by a slight decrease to 3,100 million USD in 2015. A significant increase is seen in 2016, with working capital reaching 8,870 million USD. However, from 2017 onwards, the working capital declines sharply, moving from 1,206 million USD to negative values of -3,821 million USD in 2018 and further declining to -7,069 million USD in 2019. This indicates increasing liquidity pressures or higher current liabilities relative to current assets in the later years.

Sales

Sales figures indicate a consistent upward trend throughout the examined periods. Starting at 76,392 million USD in 2014, sales increased significantly to 103,444 million USD in 2015 and continued rising each year, reaching 136,866 million USD in 2019. This represents strong revenue growth, suggesting expanding business operations or market penetration during these years.

Working Capital Turnover

The working capital turnover ratio exhibits considerable fluctuation and incomplete data. It increased from 22.82 in 2014 to a peak of 33.37 in 2015, signaling improved efficiency in using working capital to generate sales. However, in 2016, it declined sharply to 13.23 before reaching an unusually high value of 98.02 in 2017. There is no data available for 2018 and 2019. The extreme fluctuations and missing figures in recent years limit comprehensive interpretation but suggest instability in managing working capital relative to sales.

Inventory Turnover

The inventory turnover ratio exhibited a positive upward trend over the six-year period analyzed. Starting at 9.02 in 2014, the ratio decreased slightly to 8.82 in 2015 but then increased consistently each subsequent year, reaching 11.44 by 2019. This pattern indicates an improvement in the company's efficiency in managing and selling inventory, with goods being turned over more frequently as time progressed.

Average Inventory Processing Period

Conversely, the average inventory processing period demonstrated a declining trend from 2014 through 2019. Beginning at 40 days in 2014, the period increased marginally to 41 days in 2015 but then consistently decreased each year, falling to 32 days by 2019. This suggests that the company was able to reduce the time it took to process inventory on average, aligning with the increased inventory turnover ratio.

Overall Insight

The simultaneous increase in inventory turnover ratio and decrease in average inventory processing period over the six-year timeframe reflect enhanced operational efficiency in inventory management. This improvement could contribute positively to cash flow and reduce carrying costs associated with holding inventory.

Receivables Turnover

The receivables turnover ratio exhibits a notable decline from 23.74 in 2014 to 15.1 in 2015, indicating a slower collection of receivables that year. Following this dip, the ratio increases to 18.75 in 2016 and then experiences a slight decrease to 18.11 in 2017. The upward trend resumes in 2018 with a ratio of 20.01 before decreasing marginally to 18.94 in 2019. Overall, the ratio fluctuates but remains below the initial 2014 peak from 2015 onward, suggesting some variability in the efficiency of receivables collection over the observed periods.

Average Receivable Collection Period

The average receivable collection period mirrors the inverse trend of the receivables turnover ratio. Initially, it rises sharply from 15 days in 2014 to 24 days in 2015, indicating a lengthening in the time taken to collect receivables. Subsequently, the period decreases steadily to 19 days in 2016 and remains relatively stable around 18 to 20 days between 2017 and 2019. This pattern suggests efforts to improve collection efficiency after 2015, achieving a shorter and more consistent collection period during the later years.

Overall Analysis

The data reveals that 2015 was an outlier year with a marked decline in receivables turnover and a significant increase in collection period, signaling potential challenges in receivables management during that time. Subsequent years show an improvement and stabilization in these metrics, reflecting enhanced management of receivables and more consistent cash collection processes. Despite these improvements, the turnover ratio did not return to the initial high level seen in 2014 by 2019, suggesting a recalibration towards a moderate but steady collection performance over the medium term.

Inventory Processing Period

The average inventory processing period demonstrates a consistent downward trend over the observed years. Starting from 40 days in 2014, it slightly increased to 41 days in 2015 but then steadily decreased each year to reach 32 days by 2019. This indicates an improvement in inventory turnover efficiency, suggesting that the company has been able to manage its inventory more effectively and reduce the time inventory remains on hand.

Receivable Collection Period

The average receivable collection period shows some variability but remains relatively stable overall. It increased significantly from 15 days in 2014 to 24 days in 2015, indicating a slower collection process that year. Subsequently, it decreased to 19 days in 2016 and fluctuated slightly around that level, ending at 19 days in 2019. These fluctuations suggest some challenges in maintaining consistent credit collection but overall no significant long-term deterioration or improvement.

Operating Cycle

The operating cycle, which reflects the total time taken to convert inventory into cash, initially rose from 55 days in 2014 to 65 days in 2015, driven primarily by the increase in receivable collection days. Following 2015, the operating cycle shows a steady decline year over year, reaching 51 days in 2019. This reduction signals improved operational efficiency, likely influenced by the decreasing inventory processing period and the stabilization of receivables collection, allowing the company to convert resources into cash more quickly.

Payables Turnover Ratio

The payables turnover ratio exhibited a notable decline from 12.71 in 2014 to 7.59 in 2015, indicating a significant reduction in the frequency of paying off suppliers. Following this sharp drop, the ratio stabilized somewhat, fluctuating slightly but remaining within a narrow range between 7.13 and 7.95 from 2015 through 2019. This pattern suggests a shift toward a relatively consistent payment pace in the later years as compared to the higher turnover level observed in 2014.

Average Payables Payment Period

The average payables payment period demonstrated an inverse trend to the payables turnover ratio. It increased markedly from 29 days in 2014 to 48 days in 2015, reflecting a lengthened period before settling payments to suppliers. From 2015 to 2019, the payment period remained relatively steady, fluctuating narrowly between 46 and 51 days. This persistently extended payment duration compared to 2014 suggests a strategic or operational shift toward longer payment terms or improved cash flow management.

Overall Analysis

Collectively, these metrics show a clear change in the company's accounts payable management starting in 2015, characterized by fewer payables turnovers and longer payment cycles. This change could indicate efforts to optimize working capital or respond to altered supplier terms. The stabilization of both ratios after 2015 highlights a new norm in liquidity management practices, conveying a possible strategic decision to maintain these payment behaviors over the subsequent periods.

Average Inventory Processing Period

The average inventory processing period demonstrates a consistent downward trend over the years. It decreased from 40 days in 2014 to 32 days in 2019, indicating an improvement in inventory management and faster turnover of stock.

Average Receivable Collection Period

The average receivable collection period shows some variability. It increased notably from 15 days in 2014 to 24 days in 2015, then fluctuated slightly, reaching 19 days in 2019. This suggests that while there was an initial delay in receivables collection, the company managed to stabilize this period in subsequent years.

Average Payables Payment Period

The average payables payment period rose sharply from 29 days in 2014 to a peak of 51 days in 2017, then slightly declined to 49 days in 2019. This pattern indicates the company extended the period it takes to pay suppliers, potentially enhancing short-term liquidity management by delaying outflows.

Cash Conversion Cycle

The cash conversion cycle improved significantly, dropping from 26 days in 2014 to just 2 days in 2019. This reduction reflects the combined effects of quicker inventory turnover, stable receivables collection, and longer payables payment, resulting in more efficient cash flow management and reduced capital tied up in operations.